MARKET WRAPS
Watch For:
E.U. foreign trade, industrial production; U.K. Rightmove House Price Index; Germany GDP; trading update from Ashmore Group
Opening Call:
European shares look set to open higher on Monday. Asian stock benchmarks were broadly higher; the dollar weakened slightly; while oil futures and gold advanced.
Equities:
European stock futures are tracking higher. Markets in the U.S. are closed Monday for a holiday.
U.S. stock indexes ended the week higher, after declining in the first week of January.
Cindy Beaulieu, chief investment officer for North America at money manager Conning, said markets became too ebullient after Fed Chairman Jerome Powell signaled in December that the central bank was finished raising interest rates.
"It's hard to have a lot of confidence in markets continuing to improve in 2024," Beaulieu said.
Earlier Monday, China's central bank kept its key policy rates unchanged in an unexpected hold. The country's major commercial banks had lowered their deposit rates, a move seen as leaving room for more rate cuts.
On tap this week are the U.S. retail sales and jobless claims, due Wednesday and Thursday. The focus will also be on the U.K. labor market data on Tuesday and Bank of England Gov. Bailey speaking at the House of Lords regarding the U.K.'s growth outlook.
Forex:
The U.S. federal holiday today should keep things relatively quiet, RBC Capital Markets said.
The greenback continues to be "decidedly" range-bound, it said.
If the easing of global financial conditions continues and this leads to an improvement in global growth expectations, the case for broad USD weakness could become more compelling, HSBC analysts said.
Bonds:
The U.S. bond market is closed on Monday for a holiday.
Treasury yields finished mostly lower on Friday after December's producer prices report pointed to the likelihood of a continued drop in inflation.
"The path continues to clear for the Fed to begin cutting interest rates in 2024 and to slow the pace at which they shrink their balance sheet. Comerica forecasts a first quarter percentage point federal-funds rate cut at the June FOMC decision, and for the Fed to begin slowing balance sheet run-off in the second half of the year," Bill Adams, chief economist for Comerica Bank said.
"The key upside risk to inflation is from the war in the Middle East and potential disruptions to trade flows and global energy supplies."
Energy:
Oil futures gained early Monday after prices settled Friday at their highest in a week.
While geopolitical risks are building, developments in the Middle East don't appear to be leading to a reduction in oil supply, ING commodities strategists said, noting the U.S.-led coalition's air strikes against Houthi targets in Yemen.
However, the more escalation there is in the region, the more the market will need to begin pricing in a larger risk of supply disruptions, the strategists added.
Metals:
Gold edged higher in Asia after gold futures rallied Friday.
In the short term, gold's ability to hold above the key support in the $2,015/oz area has provided bulls with a renewed belief in higher prices with a focus on resistance at the late-December high of $2,088/oz, Saxo Bank said.
This ability has prevented additional long liquidation by funds which had begun the year with elevated long positions, it added.
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Copper prices rose amid robust demand from China and continued supply disruptions, ANZ Research analysts said.
The closure of the Cobre Panama mine and cuts to output at Anglo American operations may lead to a drop in supplies of the metal, the analysts said.
ANZ Research now expects a global copper production deficit for the year instead of a small surplus and for demand from China to remain robust.
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Iron ore prices were lower on high inventories.
Stockpiles of iron ore in China rose for the sixth straight month on strong imports and weak demand, ANZ Research analysts said, citing Steelhome data.
However, Beijing's latest plan to establish a real-estate financing coordination mechanism in 2024 to boost liquidity in the property sector could benefit construction materials, analysts at Maike Futures said.
The policy boost could lead to a rebound in steel and iron-ore demand, the analysts added.
TODAY'S TOP HEADLINES
China Central Bank Keeps Key Policy Rates Unchanged
China's central bank on Monday kept its key policy rates unchanged in an unexpected hold.
The country's major commercial banks had lowered their deposit rates, a move seen as leaving room for more rate cuts.
It Won't Be a Recession-It Will Just Feel Like One
The good news is the probability of a recession is down sharply, according to The Wall Street Journal's latest survey of economists. The bad news is that, for a lot of people, it is still going to feel like a recession.
Business and academic economists surveyed by the Journal lowered the probability of a recession within the next year, to 39% from 48% in the October survey.
Congressional Leaders Strike Deal to Fund Government Into Early March
WASHINGTON-Congressional leaders have reached an agreement on a new stopgap spending bill that would extend government funding into March, as House Speaker Mike Johnson (R., La.) sticks to his plan to defy the most brass-knuckled budget hawks in his party in a bid to avoid a government shutdown.
The government has been running on short-term spending laws, known as continuing resolutions, or CRs, since the start of the fiscal year on Oct. 1, as lawmakers continued to negotiate full-year funding.
After 100 Days, Israel-Hamas War Threatens to Spill Beyond Gaza, Disrupt Global Trade
After 100 days, Israel's war with Hamas is turning into a protracted conflict with no clear end, threatening to spread across the Middle East, disrupt global trade and bog down the U.S.
One of the biggest geopolitical events this century, the war has swung from a Hamas attack on Oct. 7 that Israel says killed 1,200 people to the Israeli military's ferocious retaliation against the militant group in Gaza.
Amid War in Middle East, Ukraine Fights to Keep U.S. and Allies' Focus
DAVOS, Switzerland-As Ukraine girds for the third year of full-scale war against Russia's invasion, its leaders find themselves battling on a new front: keeping allies' attention.
Since Hamas militants attacked Israel on Oct. 7, prompting an overwhelming response in the Gaza Strip and beyond, Western attention has shifted to the Middle East. Diplomats and military officials are now even more focused there as the U.S. and U.K. retaliate against attacks on shipping and naval escorts by Houthi rebels allied to Iran.
Drones Are Changing How Wars Are Fought
Drones are transforming warfare, from Red Square to the Red Sea.
Over the past decade, uncrewed aerial vehicles-and recently naval vessels-have put increasingly lethal and effective military equipment in the hands of insurgent groups such as Islamic State, Yemen's Houthi rebels and underdogs like the Ukrainian military. Kyiv used drones to slow Russia's invasion in 2022 and later sent longer-range UAVs to hit targets as far away as Moscow.
When Hamas struck Israel on Oct. 7, its attack began with strikes from hobbyist drones on Israeli surveillance posts. The Iran-backed Houthis are using drones to target Red Sea shipping lanes.
South Africans Rally Around Government's Genocide Allegations Against Israel
JOHANNESBURG-South Africans this week rallied around their government's decision to take Israel to the International Court of Justice for alleged genocide in the Gaza Strip, with many saying they were motivated by their own country's struggle against apartheid.
Its case at the United Nations court in The Hague, Netherlands, has drawn support from many human-rights organizations and other developed countries. South Africa is asking the ICJ to issue provisional orders for a cease-fire in Gaza while proceedings on the genocide claim, likely to take years, move forward.
Boeing Faces Longer Wait to Resume MAX Deliveries in China
BEIJING-Boeing's long-awaited delivery resumption of its 737 MAX jets to China faces fresh delays after the Alaska Airlines incident, as the plane maker was poised to benefit from the thaw in U.S.-China relations.
China Southern Airlines, one of several Chinese carriers with undelivered MAX jets, has been readying to receive Boeing's planes as early as January, people familiar with the matter said. Now the airline is planning to conduct additional safety inspections on those aircraft following the incident, the people said, though the jets to be delivered aren't the same variant as Alaska's MAX 9.
U.S.'s Biggest Renewable Project Is Under Way, Finally
A wind and power transmission project, called the largest of its kind in the country, has raised $11 billion in financing, kicking off a year when many utilities are expected to step up much-needed spending on the power grid.
Pattern Energy Group has started construction on its SunZia project, a wind farm in central New Mexico, where more than 900 wind turbines will generate over 3,000 megawatts of clean energy. A 550-mile transmission line will bring the power to some three million people in Arizona and California.
The CEO Who Gave 60,000 Employees His Cellphone Number
HERZOGENAURACH, Germany-A former professional soccer player, Bjørn Gulden says that when he took over Adidas just over a year ago, it felt as if the German sports giant was losing by four goals at halftime.
Morale was down after the collapse of its Yeezy collaboration with rapper Kanye West, who now goes by Ye, and employees complained about a lack of transparency.
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Expected Major Events for Monday
00:01/UK: Dec UK Regional PMI
00:01/UK: Jan Rightmove House Price Index
06:00/FIN: Dec CPI
06:00/FIN: Nov Retail sales
07:00/SWE: Dec CPI
07:00/GER: Dec WPI
(MORE TO FOLLOW) Dow Jones Newswires
01-15-24 0014ET
